What Is A Crypto Airdrop?

Every day new DeFi projects are launched. Many of these also launch accompanying tokens. This has led to the emergence of 'airdrops' to draw people into these new crypto ecosystems. 

An airdrop happens when a cryptocurrency is distributed to a group of people for free. Most airdrops take place on smart contract platforms like Ethereum ETH/USD, Binance Smart Chain BNB/USD, and Avalanche AVAX/USD

Each airdrop has its quirks. Some airdrops are random and don't require any action by the user. For example, you might check your Ethereum or Binance Smart Chain wallet and see a new token that you don't recognize. Because anyone can create a new token and send it to an address, these types of airdrops are not uncommon. However, you should exercise due diligence when interacting with a token that has been unexpectedly airdropped to your wallet. 

Other airdrops may require that the user has met some criteria. During the Uniswap UNI/USD airdrop, 400 UNI was airdropped to anyone who had used the protocol before September 1st, 2020. The 1inch (CRYPTO:1INCH) protocol also airdropped tokens based on historical usage of the platform. Both of these airdrops were worth thousands of dollars - but this is the exception, not the rule. Additionally, the criteria for these airdrops were not announced in advance so that no one could game the system to amass tokens.

"Surprise" airdrops like the UNI and 1INCH airdrops may be a windfall for users of the platform, but they are also unpredictable and down to luck. During these airdrops, only the early adopters of the project received anything. Because the criteria for an airdrop is up to the team behind a project, there's no way to tell what a surprise airdrop will look like - or if it will happen at all.

Many tokens are airdropped in exchange for users performing simple tasks. These tasks might be following the project on social media, writing a blog post, or otherwise spreading the word about the project. Sometimes, people holding a predetermined minimum amount of tokens will receive an airdrop. These airdrops tend to be announced in advance.

But Why Would Someone Give Away Crypto?

Many airdrops are an effort to distribute tokens fairly. When a large project launches a token - as in the case of Uniswap - an airdrop rewards previous users who helped the project to grow. This can help attract new users, who use the platform with the hope of also being rewarded. An airdrop might be seen as good etiquette by the community. If a successful project launched a newly minted token without an airdrop, it might be perceived as having turned its back on the initial investors who made it popular. 

Some airdrops also target investors who could bring value to the project. For example, a DeFi project might use an airdrop to entice the customers of another. The 1INCH airdrop targeted Uniswap users to try to convince them to switch to the competing 1inch platform.

Airdrops have also become a common marketing tool for new DeFi startups. Today, many airdrops are announced in advance, or rewarded in exchange for likes and shares. Many development teams use the engagement an airdrop announcement creates to help bootstrap their project from the ground up. This is typical for smaller projects without much history or momentum. As a result, the value of the airdrop is generally low. If the project gains steam, the value of the token would likely appreciate - making the airdropped amount more valuable.

How can I get an Airdrop?

Most big airdrops are down to sheer luck. Some require you to be in the right place at the right time. However, airdrops that are announced in advance can be capitalised on by anyone. These airdrops generally require users to do something simple, like sharing a social media post or using an app or platform.

Some websites like CoinMarketCap feature an airdrop calendar for new projects, and there are many websites dedicated to highlighting new airdrops. Many projects announce airdrops on their Twitter feed, and there are Twitter and Telegram accounts dedicated to tracking the latest airdrops that have been announced.

Anything Else I Should Know?

While airdrops are free by their nature, they may require users to complete tasks and may have associated network transaction fees. This can vary by project, and users should exercise discretion for this reason. Before participating in an airdrop, users should research a project to ensure it is legitimate. Unexpected airdrops should be scrutinised in particular. Do not interact with a token or project if you aren't sure it's safe. If it seems too good to be true, it probably is.

Airdrops might have associated tax or legal implications depending on your jurisdiction. Some airdrops require the user to voluntarily claim them, and some are airdropped automatically. Make sure you are familiar with the legal standing of any airdrops you intend to participate in.

More Info On Airdrops HERE

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